Press releases

CALLS ON EUROPEAN COMMISSION AND MEMBER STATES TO IMPLEMENT SAFEGUARDS TO BRING BALANCE TO EUROPE’S PATENT LEGAL SYSTEM AND PREVENT ABUSES

IP2I welcomes the recognition by the Council of the European Union in its Conclusions of 12 March 2018 that fair and effective judicial enforcement of IPR is a key lever to promote investment in innovation and growth.

However, IP2I believes the Council should have also recognised the importance of providing safeguards against practices designed to abuse specific measures, procedures and remedies of Europe’s patent legal system.

The recent ground breaking report by Darts-ip, the world’s leading authority in intellectual property case law data, demonstrates that Europe’s innovation ecosystem and Europe’s operating companies are under increasing attack from Patent Assertion Entities (PAEs), also commonly known as “non-practising entities” (NPEs) or “patent trolls.” There has been a 20% year-on-year jump in PAE litigation. US-based PAEs initiated most of those suits (60%) and targeted applications of information and communication technologies (ICT) (75%). As application of ICT is central to innovation and growth across many industries, the consequences of these attacks will be far-reaching. Most importantly, data shows that it is not just large companies who are affected — almost a quarter of the unique defendants are European SMEs. Germany is the preferred venue, with 20% of all German patent litigation having been brought by PAEs.

PAEs do not innovate and do not create and sell new products. Instead, they buy up patents and profit from asserting these patents against operating companies by exploiting imbalances in Europe’s patent system. Such abusive litigation practices by PAEs are a drain on the resources of operating companies and hamper their ability to develop new products and bring them to market in Europe.

IP2I calls on the European Commission and Member States to ensure urgent and rigorous implementation of safeguards for all patents (not just Standard Essential Patents) to bring balance to Europe’s patent legal system so that it supports innovation and economic growth for the benefit of society and consumers and prevents abusive practices.

NOTES TO EDITORS:

IP2Innovate (IP2I) is a coalition of small and large companies that create innovative products and services in Europe and collectively hold thousands of European patents, as well as European industry groups that collectively represent 65 companies. IP2I members have directly experienced patent assertion entities that are adept at exploiting the rigidities of Europe’s patent systems on automatic permanent injunctions, inadequate fee shifting and poor- quality patents. IP2I advocates for a robust, balanced and flexible patent legal system in Europe that protects innovators against abuse, works in the public interest and rewards innovators fairly.

Watch the video on Patent Assertion Entities, how they operate and how they damage innovation. PAEs exploit Europe’s patent litigation system for their own financial gain at the expense of European innovation and Europe’s economy.

Watch the video summarising the event at the European Parliament launching the Darts-ip report.

Safeguards to restore balance to Europe’s patent legal system:

PAEs are increasingly drawn to Europe because they have discovered that they can profitably exploit certain imbalances in the European patent legal system through abusive litigation tactics. But each of those imbalances can be corrected through reasonable safeguards that we urge the Commission and Member States to implement. These safeguards include:

Applying the principles of proportionality and equity to the decision of whether to grant a permanent injunction in patent cases;

Bridging the injunction gap in which an injunction follows a finding of infringement even though a validity challenge is on-going through improved case management;

Improving patent quality;

Making fee shifting effective by eliminating artificially-low caps and requiring that underfunded PAEs post a bond; and

Increasing the transparency of court proceedings and the information available about patent cases.

Such safeguards will ensure a robust patent legal system that protects R&D and invention while preventing abuse that could undermine the goals of the system to encourage innovation.

European innovation is increasingly under attack from patent assertion entities (PAEs) and particularly from US-based PAEs who now file the majority of PAE suits in Europe. This is the conclusion evident from the information presented by the world’s leading authority in intellectual property case law data, DARTS-IP, to Europe’s lawmakers, regulators and business leaders this evening.

PAEs do not innovate and do not create and sell new products. Instead, they buy up patents and profit from asserting these patents against operating companies. In pursuing this model, PAEs can exploit certain aspects of Europe’s patent legal system to the detriment of Europe’s innovators and the European public.

DARTS-IP’s comprehensive study of the past ten years of available patent litigation data in Europe reveals increasing activity by PAEs, also commonly known as “non- practising entities” (NPEs) or “patent trolls.” There has been a 20% year-on-year jump in PAE litigation. US-based PAEs initiated most of those suits (60%) and targeted applications of information and communication technologies (ICT) (75%). As application of ICT is central to innovation and growth across many industries, the consequences of these attacks will be far-reaching. Most importantly, data shows that it is not just large companies who are affected — almost a quarter of the unique defendants are European SMEs. Germany is the preferred venue, with 20% of all German patent litigation having been brought by PAEs.

Luxembourg MEP Mady Delvaux said: “The future of artificial intelligence, the internet of things and the digital economy are being put at risk. In order to prevent abuses, we need to make sure that Europe’s patent legal system operates effectively for both litigants and society and supports digital innovation in Europe.”

Swedish MEP Max Andersson said: “For the first time we have accurate data on the litigation practices of patent assertion entities in Europe. But this is just the tip of the iceberg. The problem of abusive patent litigation goes way deeper. We need transparency and more complete data to find solutions.”

The DARTS-IP findings will be of deep concern to the European Commission following release of their November 2017 IP Communications Package.

Kevin Prey, Chairman of IP2Innovate, said: “The DARTS-IP study confirms what many in industry have suspected, that for the past few years PAE activity is on the rise in Europe. Without rigorous implementation of safeguards by Member States, abusive litigation practices will undermine European innovation. Europe’s patent legal system must be able to detect and prevent these abuses. The European Commission and the Member States should move quickly to provide investors and innovators with greater protections, particularly in terms of increased transparency and litigation data. The patent system must support, not hinder, innovation and growth.”

Notes to editors

IP2Innovate (IP2I) is a coalition of small and large companies that create innovative products and services in Europe and collectively hold thousands of European patents, as well as European industry groups that collectively represent 65 companies. IP2I members have directly experienced patent assertion entities that are adept at exploiting the rigidities of Europe’s patent systems on automatic permanent injunctions, inadequate fee shifting and poor- quality patents. IP2I advocates for a robust, balanced and flexible patent legal system in Europe that protects innovators against abuse, works in the public interest and rewards innovators fairly.

Watch the video (https://www.youtube.com/watch?v=S7TK0GkWOmk) on Patent Assertion Entities, how they operate and how they damage innovation. PAEs exploit Europe’s patent litigation system for their own financial gain at the expense of European innovation and Europe’s economy.

European Commission’s IP Package of 29 November 2017:
The IP Package of 29 November proposes a series of important safeguards that would help prevent abuse of the patent legal system in Europe. These include reaffirmation of the proportionality principle requiring that judges grant remedies adapted to the facts of the case and not issue automatic injunctions; better implementation of fee shifting; and increased transparency and litigation data.
But key issues in the IP Package need further development:

All patents deserve safeguards, including the proportionality principle, not just Standard Essential Patents (SEPs). If some patents are left unprotected by the new safeguards, PAEs will continue targeting European manufacturers with abusive litigation practices.

All courts must respect the safeguards. If there is no implementation rigour across the Member States, abuse of the patent legal system in Europe will continue as PAEs take advantage of the differences in how safeguards are applied across Member States and initiate litigation in jurisdictions that give them the most leverage.

Without rigorous implementation of new safeguards to all patents, international patent trolls will continue their corrosive impact on Europe’s patent legal system. The European Commission yesterday took an essential first step in recognising the problem of patent trolling and abusive lawsuits in Europe, but fell short of a fully inclusive approach.

The IP Package of 29 November proposes a series of important safeguards to prevent further abuse of the patent legal system in Europe. These include reaffirmation of the proportionality principle so judges to grant adapted remedies and not issue automatic injunctions; better implementation of fee shifting; and increased transparency of patent litigation data.

But two key issues have not been addressed in the IP Package.

All patents deserve safeguards, including the proportionality principle, not just a limited few. If some patents are left unprotected by the new safeguards, the patent trolls will continue targeting European manufacturers with abusive litigation practices.

All courts must respect the safeguards. If there is no implementation rigour across the Member States, abuse of the patent legal system in Europe will continue as patent trolls take advantage of the differences in how safeguards are applied across Member States and initiate litigation in jurisdictions that give them the most leverage.

Patrick Oliver, Executive Director of IP2Innovate said “Vice-President Ansip must quickly provide investors and innovators with greater certainty. The safeguards outlined by the Commission in the IP Package are an essential first step to prevent abusive litigation practices. Two further steps are now needed. First, the Commission must acknowledge the need for safeguards to apply to all patents. Second, the Commission must work with Member States, industry, the legal profession and judicial authorities to ensure these safeguards are implemented and applied in practice.”

Oliver continued, “All patents need strong safeguards. Not just a few. And we need to see rigour in implementation. More abuse of the legal system by patent trolls and more damage to Europe’s innovators is a frightening prospect.”

IP2Innovate is a coalition of business innovators that hold thousands of European patents and have direct experience of patent trolls.

The EU is facing a new explosion of patent infringement lawsuits from so-called patent trolls that are abusing Europe’s legal system(s) for financial gain. The large majority of such cases are filed in Germany and France. In Germany they now make up a staggering 20 percent of all patent lawsuits. (more…)

European innovators are threatened by significant abuse of the patent legal system, perpetrated by patent assertion entities that make no products or services but buy up patents expressly to demand payments from successful companies. In response, a new European industry coalition – IP2Innovate – is pressing for a more robust, balanced and flexible legal system to protect Europe’s innovators and enable Europe’s innovation potential to flourish. (more…)